EconPapers    
Economics at your fingertips  
 

The Microstructure of the Bond Market in the 20th Century

Bruno Biais () and Richard Green

No 2005-E57, GSIA Working Papers from Carnegie Mellon University, Tepper School of Business

Abstract: Bonds are traded in OTC markets, where opacity and fragmentation imply large transaction costs for retail investors. Is there something special about bonds, in contrast to stocks, that precludes trading in transparent, limit-order markets? Historical experience suggests this is not the case. Before WWII, there was an active market in corporate and municipal bonds on the NYSE. Activity dropped dramatically, in the late 1920s for municipals and in the mid 1940s for corporate, as trading migrated to the OTC market. This migration occurred simultaneously with an increase in the role of institutional investors, which fare better than retail investors in OTC market. Based on current and historical high frequency data, we find that, for retail investors, trading costs in municipal bonds were half as large in 1926-1927 as they are now. The difference in transactions costs is likely to reflect the difference in market structures.

References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
https://student-3k.tepper.cmu.edu/gsiadoc/wp/2005-E57.pdf
Our link check indicates that this URL is bad, the error code is: 401 Unauthorized

Related works:
Journal Article: The Microstructure of the Bond Market in the 20th Century (2019) Downloads
Working Paper: The Microstructure of the Bond Market in the 20th Century (2018) Downloads
Working Paper: The Microstructure of the Bond Market in the 20th Century (2007) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cmu:gsiawp:2073810639

Ordering information: This working paper can be ordered from
http://student-3k.te ... /gsiadoc/GSIA_WP.asp

Access Statistics for this paper

More papers in GSIA Working Papers from Carnegie Mellon University, Tepper School of Business Tepper School of Business, Carnegie Mellon University, 5000 Forbes Avenue, Pittsburgh, PA 15213-3890.
Bibliographic data for series maintained by Steve Spear ().

 
Page updated 2021-04-13
Handle: RePEc:cmu:gsiawp:2073810639